Thursday, January 06, 2011

TIGTA: IRS Refuses to Take Steps to Cut Down on Prisoner Tax Fraud

The Treasury Inspector General for Tax Administration (TIGTA) released a new report about fraudulent tax returns from prisoners. TIGTA calls out the IRS for failing to take action on the tens of thousands of fraudulent tax returns filed by people who are currently incarcerated. While average taxpayers are being hounded for innocent mistakes, the IRS is just letting prisoners commit fraud without doing anything. This is simply absurd.

Check out a snippet from the report below.

The IRS has not shared prisoner tax return information with Federal and State prison officials to help combat tax fraud by inmates. ... The Inmate Tax Fraud Prevention Act of 2008, signed October 15, 2008 and amended in July 2010, provides the IRS with the authority to disclose information on prisoners who have filed a false tax return to the head of the Federal Bureau of Prisons and State departments of corrections. The law also requires TIGTA to provide Congress with a report on the IRS’s progress in sharing prisoner tax information.

TIGTA found that the IRS had not provided any information on prisoner returns to either the Federal Bureau of Prisons or State Departments of Corrections as of October 2010. Prison officials told TIGTA that receiving Federal tax return information on prisoners would help reduce both tax fraud and other illegal activity....

TIGTA also found that the IRS may have understated the amount of prisoner tax fraud in a 2009 report to Congress. In that report, the IRS identified 44,944 false/fraudulent prisoner tax returns during Calendar Year 2009. However, the IRS’s report was limited to only those tax returns the IRS identified and chose to evaluate for fraud. TIGTA identified 540,984 tax returns that were filed by prisoners in 2009, of which 54,410 were not identified by the IRS as having been filed by a prisoner.

In addition, TIGTA found that the process used by the IRS to compile its annual file of individuals in Federal and State prisons lacked managerial oversight to ensure accuracy and reliability. Even though the prisoner file is the IRS’s single most effective tool to identify potentially fraudulent prisoner tax returns before refunds are issued, key data in the 2009 prisoner file were inaccurate and/or incomplete.